U.S. manufacturing growth accelerates: Will job growth follow?

Growth in the manufacturing sector of the U.S. economy, which has led the economic recovery, actually accelerated in January according to the ISM Manufacturing Index released yesterday February 1. This survey of attitudes among purchasing managers climbed to 60.8 in January from 58.5 in December. January’s reading was the highest since May 2004. (In this index anything above 50 indicates expansion. Below 50 shows contraction.)

There was strength right down the line in the index. New orders picked up to 67.8 from 62.0 in December. The order backlog index rose for the first time since August 2010 to 58.0 from 47.0 in December.

There was even good news for the job market in these numbers as the employment index, which measures respondents’ willingness to hire, climbed to the highest level since 1973.

The strength of the numbers surprised economists. According to Briefing.com, economists had expected the index to drop to 58.4 in January from December’s 62.0.

The strength in U.S. manufacturing found an echo in numbers from the United Kingdom, where, despite a contracting economy, manufacturing grew at a record rate in January, and from China, where a purchasing managers index from HSBC and Markit Economics climbed to 54.5 in January.

Unfortunately, manufacturing accounts for only about 11% of U.S. GDP.

The next big piece of U.S. economic news comes on Friday with the release of the January jobs numbers. (Today the ADP survey of employers showed job growth of 187,000 for January. While encouraging, this survey often doesn’t correspond very closely with the government jobs numbers.) Economists are expecting a relatively disappointing 148,000 net new jobs for the month. That would be up from the 103,000 net jobs in December but still well below the level needed to cut unemployment significantly.